Company Overview August 2021 - Investor Relations
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Company Overview August 2021 © Red Violet, Inc. All Rights Reserved.
Cautionary Statement This presentation contains "forward-looking statements," as that term is defined under the Private Securities Litigation Reform Act of 1995 (PSLRA), which statements may be identified by words such as "expects," "plans," "projects," "will," "may," "anticipate," "believes," "should," "intends," "estimates," and other words of similar meaning. Such forward-looking statements include non-historical statements about our expectations, beliefs or intentions regarding our business, technologies and products, financial condition, strategies or prospects. There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including: the risks set forth under the heading “Forward-Looking Statements” and “Risk Factors” in red violet’s Form 10-K for the year ended December 31, 2021 filed on March 10, 2021, as may be supplemented or amended by red violet’s other SEC filings. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. You are cautioned not to place undue reliance on these forward-looking statements, which are based on red violet’s expectations as of the date of this presentation and speak only as of the date of this presentation. red violet undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Without limiting the foregoing, the inclusion of the financial projections in this presentation should not be regarded as an indication that the Company considered, or now considers, them to be a reliable prediction of the future results. The financial projections were not prepared with a view towards public disclosure or with a view to complying with the published guidelines of the Securities Exchange Commission, the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, or with U.S. generally accepted accounting principles. Neither the Company’s independent auditors, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the financial projections, nor have they expressed any opinion or any other form of assurance on such information or its achievability. Although the financial projections were prepared based on assumptions and estimates that the Company’s management believes are reasonable, the Company provides no assurance that the assumptions made in preparing the financial projections will prove accurate or that actual results will be consistent with these financial projections. Projections of this type involve significant risks and uncertainties, should not be read as guarantees of future performance or results and will not necessarily be accurate indicators of whether or not such results will be achieved. Management evaluates the financial performance of our business on a variety of key indicators, including non-GAAP metrics of adjusted EBITDA, adjusted EBITDA margin, adjusted gross profit and adjusted gross margin. Adjusted EBITDA is a financial measure equal to net loss, the most directly comparable financial measure based on US GAAP, excluding interest income, depreciation and amortization, share-based compensation expense, litigation costs, insurance proceeds in relation to settled litigation, transition service income, write-off of long-lived assets and others. We define adjusted EBITDA margin as adjusted EBITDA as a percentage of revenue. We define adjusted gross profit as revenue less cost of revenue (exclusive of depreciation and amortization), and adjusted gross margin as adjusted gross profit as a percentage of revenue. 2 © Red Violet, Inc. All Rights Reserved.
red violet at a Glance
Most Advanced Identity Intelligence Platform
Cloud-native platform delivering greater intelligence and unparalleled
insight for decision-making capabilities
March 26, 2018 $39M Scalable and Efficient
Initial Listing TTM Revenue(1) Quick and cost-effective deployment that is scalable to virtually unlimited
capacity and performance
Large and Growing Market
Numerous expansion and increased penetration opportunities
Designed with Security in Mind
NASDAQ: RDVT 75% Built in a secure payment card industry (PCI) compliant environment
Ticker Symbol Adj. Gross Margin(1)
Proven Management Team
Highly experienced management team with track record of scaling businesses
Our Brands
6,000+ 81%
Customers Contractual Revenue(1)
Leading analytics and information solutions Instant knowledge to help Real
provider delivering actionable intelligence Estate professionals better
to the risk management industry understand and address risk
(1) For the quarter ended June 30, 2021.
3 © Red Violet, Inc. All Rights Reserved.
Seasoned Management Team With Deep Data and Analytics Industry Experience
Name and Title Biography Prior Experience
▪ Over 20 years of experience in the data and analytics industry
Derek Dubner
CEO ▪ Built leading information management companies which sold for an
aggregate value of approximately $1 billion
James Reilly
President ▪ Over 20 years of executive experience in data markets
Dan MacLachlan ▪ Over 15 years of experience as the CFO of data-driven technology
CFO companies
Jeff Dell ▪ Over 20 years of experience in Information Security as an executive in
CIO data-driven technology companies
Angus Macnab ▪ Over 15 years of experience in data science, engineering, and scientific
CTO computing
▪ Over 20 years of experience in the digital identity and mobility space,
Jim Greenwell
GM, Identity working as an executive and adviser to leading identity management and
information solutions providers
4 © Red Violet, Inc. All Rights Reserved.
Challenges That Businesses Are Facing Today
Organizations are challenged by the structure, volume and disparity of data. Our platform and applications transform the way customers interact with
information, presenting connections and relevance of information otherwise unattainable, which drives actionable insights and better outcomes.
Managing Identity Legislative Consumer
Risk Verification Compliance Modeling
red violet’s advanced In a world of omnichannel red violet simplifies Understanding the consumer
analytics and enterprise engagement, verifying a compliance with turn-key is more important than ever in
solutions drive successful consumer’s identity is a top solutions that drive a digital economy. red violet’s
business decisions in challenge. red violet actionable insights and consumer identity graph
real-time, providing provides identity better outcomes, allowing provides connections and
organizations the ability to intelligence that meets a businesses to comply with relevant characteristics,
make informed decisions business’s specific identity government and industry allowing businesses to build
and mitigate risk. needs and workflow. regulations. strong relationships.
5 © Red Violet, Inc. All Rights Reserved.
Our Intelligent Platform – CORE
TM
Disparate Data Identity Intelligence
Financial:
With massive data assets consisting of ▪ Identity Verification / Fraud Prevention
public record, proprietary and publicly- ▪ Collections Activity
available data, our differentiated ▪ AML, KYC, BSA Efforts
information and innovative platform ▪ Due Diligence
and solutions deliver intelligence
relating to all things identity. Real Estate:
▪ Consumer Data Appends
▪ Consumer Modeling / Segmentation
▪ Identity Verification / Risk Assessment
Data
▪ Scalable / performant cloud-native
Sources Collections:
infrastructure that is fully automated ▪ Collections Activity / Right-party contact
▪ Compliance
▪ Proprietary, scalable, distributed ▪ Employment Verification/Bank Account Locate
Financial Employment
memory, data processing platform Retail:
Location ▪ Identity Verification / Fraud Prevention
▪ Distributed supervised and ▪ Collection Activity
Phone unsupervised machine learning ▪ Frictionless Commerce
Investigative:
Demographic
Property ▪ Low latency / high throughput search ▪ Investigative Support
and information retrieval solutions ▪ Subject / Asset Locate
▪ Identity Verification / Fraud Prevention
using Boolean and inverted indices ▪ Compliance
Relationships Social
▪ Scalable to virtually unlimited Background Screening:
capacity and performance ▪ Identity Verification / Fraud Prevention
▪ Criminal Record Research
6 © Red Violet, Inc. All Rights Reserved.
red violet Plays in a Large and Fast-Growing TAM
$10B
# of Businesses(1) red violet’s Bottom-Up TAM(4)
$83B
Global Big Data & Analytics
Software Revenue(3)
90,000 ( 35% Avg.
Penetration ) ($180k
Avg. ACV ) $5.7B (15.4% CAGR)
$30B
Global Analytics and
100,000 ( 36% Avg.
Penetration ) ( $75k
Avg. ACV ) $2.7B Business Intelligence
Software Revenue(2)
$10B
120,000 ( 37% Avg.
Penetration ) ( $26k
Avg. ACV ) $1.1B Bottom-Up
TAM Analysis(4)
282,000 ( 50% Avg.
Penetration ) ( $5k
Avg. ACV ) $0.7B
(1) Represents serviceable market for verticals in which the company currently operates.
(2) Gartner Forecast Analysis: Analytics and Business Intelligence Software, Worldwide, September 2020. Represents 2021 figure.
(3) IDC Worldwide Big Data and Analytics Software Forecast, 2021 – 2025, July 2021. Represents 2021 figure. CAGR represents 2020 – 2025.
(4) Management’s Estimates Based on Public Sources and Industry Knowledge.
7 © Red Violet, Inc. All Rights Reserved.
Our Business Model Provides a Compelling Investment Opportunity
Next-Generation Technology Platform
✓ Proprietary data and industry agnostic platform drives cost efficient solutions across industries
Differentiated Owned Data Asset
✓ Massive proprietary datasets of alternative and internally generated data unified by proprietary algorithms and analytic processes
Subscription-Based
✓ 81% of revenue attributable to customer contracts, generally annual contracts or longer, with auto renewal (1)
Fixed-Cost Model
✓ We acquire data using flat-rate, unlimited use long-term contracts, so as revenue scales, our cost of revenue does not
Large and Growing Market
✓ $10B+ serviceable market today with $80B+ in total addressable market (2)
Strong Operating Leverage
✓ $3.7M increase in adjusted gross profit provided $2.2M improvement in adjusted EBITDA over Q2’20, ~60% contribution (1)
Experienced Management Team
✓ Team previously built current industry competitors which were acquired for an aggregate value of approximately $1B
(1) For the quarter ended June 30, 2021.
(2) IDC Worldwide Big Data and Analytics Software Forecast, 2021 – 2025, July 2021.
8 © Red Violet, Inc. All Rights Reserved.
Our Brands
The Value of Instant Due
Diligence with FOREWARN:
IDI’s full investigative and risk Manually verified place of Using only the incoming phone number,
management tool and your go- employment and bank account FOREWARN can positively identify over 80%
to identity verification, location, and locates. Verified, actionable of prospective buyers
skip trace solution. Full views of, and and guaranteed.
connections between, people, Identify if your prospect has a criminal history
businesses, assets and more. Better
information at a better price. Verify current property and vehicle ownership
Verify financial risks (bankruptcies / liens)
Batch and API Solutions Custom Data Analytics
Fast, accurate, and cost- IDI’s next-generation data Verify additional phone numbers and full
effective. Customers can fusion platform and analytical address history
leverage IDI data in a single, applications enable greater
automated solution for identity insight into your own data,
Agents can properly and safely plan for
intelligence and more. while simultaneously
showings with a higher level of confidence
leveraging IDI’s massive data
repository.
9 © Red Violet, Inc. All Rights Reserved.
Growth Drivers
RAPIDLY GROWING AMOUNTS OF DISPARATE DATA
MACRO TAILWINDS
WORLDWIDE DIGITAL TRANSFORMATION
INCREASING
RATES OF FRAUD Expansion
▪ Expanding product suite will allow
for entrance into new verticals and
geographic markets
Custom Solutions
▪ Introduction of additional sales
▪ Solve complex problems for channels will reach nontraditional
enterprise customers customers
▪ Tailor solutions to meet unique
Penetration needs of each customer
▪ Expanded spend from customer
Adoption base through cross-sell and upsell
▪ Proven, scalable sales model
GROWTH INITIATIVES
10 © Red Violet, Inc. All Rights Reserved.Case Studies
1 Identity Verification
Global Leader in Identity Verification Solutions for Real-time Risk Decisioning
The ability to prove digital identity is needed to create trust in a digital world
Customer needed a data solution that would provide broad US consumer coverage and meaningful insights to help reduce friction , improve conversion and combat
fraud. We won their business because of the comprehensive consumer coverage of our data assets, accuracy, speed, pricing and scalability of our transaction
processing. A customer since early 2020, we continue to partner on solutions that will expand the relationship.
2 Commercial Entity Resolution
Leading Provider of Commercial Real Estate Intelligence
Commercial real estate is swimming in unstructured data that has become overwhelming and difficult to unify
In 2018, customer needed better underlying identity data to fuel critical aspects of their commercial real estate due diligen ce platform. Challenged with
understanding exact consumer identities associated with ownership entities gleaned from property -centric information, The customer found our deep, unified
data assets, coupled with advanced data delivery and querying capabilities, to be unmatched. Following a brief testing perio d, a wholesale switch occurred from
their previous provider for their applicable information needs and recently renewed for an additional, multi -year agreement.
11 © Red Violet, Inc. All Rights Reserved.Case Studies (Cont’d)
3 Background Screening
Leading Global Data & Analytics Company
Timely and accurate information is critical to keep workplaces and businesses safe
Customer needed a high-volume performant information solution to validate identity and fully profile applicant location historie s in support of background verifications
and investigations. We won this business from competitive solutions because our cloud -native platform provided higher quality information through a more scalable
and performant API at a better price. A customer since early 2017, we have established a great partnership that has seen thei r business with us grow exponentially
since the early days of the relationship.
4 Consumer Profiling & Segmentation
Leading PropTech Company
The need for true predictive insights in real estate markets has never been greater
As one of the most trusted providers of comprehensive real estate data nationwide, the customer set out to develop powerful t ools that allow their customers (real
estate investors, agents, and brokers) to make informed decisions and stay ahead of the game. They needed to partner with an information solutions provider that
would augment their comprehensive property coverage by resolving such information back to consumers, creating tools for their customers that provide predictive
insights through propensity modeling. By leveraging our consumer identity graph through our flexible API, we were able to win their business by providing significantly
better consumer information at scale in terms of both coverage and accuracy. A customer since late 2018, their volume with us has grown significantly as they have
integrated and incorporated additional solutions into their platform.
12 © Red Violet, Inc. All Rights Reserved.Differentiation – red violet’s Intelligent Platform
Advanced, fully-automated identity
1 Technology intelligence platform designed to be used at
scale with the help of machine learning
CORE conducts analysis of billions of data
2 Data
points to identify complex interrelationships
Automated monitoring, flexible APIs and
3 Scalability &
industry-leading batch processing allows for
Availability
virtually unlimited capacity and performance
Operates in secure cloud environments in
data centers across the U.S., reinforced by
4 Security
thorough behavior analysis and automated
production systems
13 © Red Violet, Inc. All Rights Reserved.Differentiation – Technology 1
Harnessing the power of CORE, we have created the most advanced and performant identity intelligence platform.
Next-Generation Platform Data Analytics and Engineering
Proprietary, scalable, distributed memory, data Data unification/entity resolution at scale
processing platform
Superior to “map reduce” frameworks in
performance and functionality Graph analysis of complex
interrelationships among billions of entities
Built upon table operator abstractions using a
functional programming approach
Low latency/high throughput search and
information retrieval solutions using Boolean
and inverted indices
Relational and graph database functionality
Scalable/performant cloud-based infrastructure
Distributed supervised and unsupervised
that is fully automated
machine learning
14 © Red Violet, Inc. All Rights Reserved.Differentiation – Massive Unified Data Asset 2
Disparate Data Sources CORE Platform Actionable Intelligence
Automotive
Email & Death
IP
Mobile
Social
Financial
Bankruptcies, Liens,
Employment
& Judgments
Military
Behavioral
Criminal Property Predictive
Relationships Actionable
Location
Intelligence
Demographic
Public
Meta Foreclosures Record
Phone
Proprietary entity resolution technology that links Actionable, real-time information, delivering
Includes proprietary, public record, publicly-available, and self-reported data these data sources to identify people, businesses, greater intelligence and unparalleled
assets, events and their interrelationships insights for decision-making
15 © Red Violet, Inc. All Rights Reserved.Differentiation – Scalability and Availability 3
We uncover the relevance of disparate data points utilizing our analytical capabilities to provide real-
time and insightful views of people, businesses, assets and their interrelationships.
Handling burst rates
Flexible APIs built to Online access of over 40 million
handle simple through an intuitive detailed searches
requests and complex interface designed per day
integrations to provide fast and
effective results
Multiple
Access Best-in-class Batch Scalability
Methods and Processing platform and
Automated Tools for ingestion,
Availability
processing, and
Monitoring solutions
delivery of large data
to track changes in
files
consumer, business,
and asset data points Monitoring daily Scalable to
Designed for changes on over virtually unlimited
accelerated 100 million capacity and
development of consumers in 30 performance
Custom Solutions minutes of
based on any access processing time
method
16 © Red Violet, Inc. All Rights Reserved.Differentiation – Security 4
Built in a secure payment card industry (PCI) compliant cloud environment, we operate in data centers
across the U.S. using an intelligent framework and leveraging a microservices architecture.
Leading-Edge Security Features Secure Environment
1 Processing of over 100 GB of log data daily
Automated internal and customer activity
2
behavior analysis
1 2 3 4
Heavily fortified, fully auditable, secure
3
environment
Automation of production systems to
4
enforce layered security
17 © Red Violet, Inc. All Rights Reserved.Why We Win
Cloud-native technology platform providing the most
Scalable and Intelligent advanced and performant identity intelligence
Customizable Interface
Solutions Design
Massively scalable and customizable platform meeting
Dynamic & the high-volume needs of customers
Customer-
Seamless
Centric Support
Scaling
Significantly better data fusion at scale for improved
Customer- Cloud-Native
Tailored Proprietary coverage and accuracy
Pricing Platform
Better Data
Fusion Robust operating leverage and efficiency leading to
customer-centric, value pricing
18 © Red Violet, Inc. All Rights Reserved.Scalable Go-To-Market Strategy
▪ New opportunities are sourced from each of the 3 primary channels below
New Customer Acquisition ▪ Once the opportunity is qualified and credentialed for proper use case, they generally begin with a free trial
▪ The free trial is followed by an initial purchase on a transactional basis or minimum-committed monthly spend
% of FY2020A Revenue
1
Inside Sales Cultivates relationships through inbound/outbound calling, and ultimately 47%
closes business with their end-user markets
2
With leading industry knowledge, provides a more personal, face-to-face
Strategic Sales approach for top-tier accounts within certain industries 19%
3 We power organizations with a significant foothold in industries that we
Distributors, Resellers & have not historically served, as well as to further penetrate those industries 34%
Strategic Partners that we do serve
Existing Customers
As organizations derive benefits from our solutions, we are able to expand within organizations as
Land and Expand additional use cases are presented across departments, divisions and geographic locations and
customers become increasingly reliant on our solutions in their daily workflow
19 © Red Violet, Inc. All Rights Reserved.Financial Highlights
$34.6M 59% 75%
FY2017 - FY2020
FY2020 Revenue Q2’21 Adj. Gross Margin
Revenue CAGR
29% 81% 6%
Q2’21 Contractual Q2’21 Revenue
Q2’21 Adj. EBITDA Margin
Revenue Attrition
20 © Red Violet, Inc. All Rights Reserved.Robust Top-Line Momentum & Building Substantial Operating Leverage
Revenue and Adj. Gross Margin Adj. EBITDA
($ in millions) ($ in millions)
Adj. Gross Margin(1) ’17 – ’20 Adj. EBITDA Margin(1)
Revenue CAGR: 59% Adj. EBITDA(1)
17.1%
6.3%
67.4% (26.6%)
$5.9
59.5%
$34.6
(96.8%)
47.0%
$30.3 $1.9
17.6%
$16.3
($4.3)
$8.6
($8.3)
2017 2018 2019 2020 2017 2018 2019 2020
(1) Adjusted gross margin, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures, please see slide 25.
21 © Red Violet, Inc. All Rights Reserved.Strong Unit Economics Underpin Financial Model Leverage
Revenue and Adj. Gross Margin Adj. EBITDA
($ in millions) ($ in millions)
Adj. Gross Margin(1) Adj. EBITDA Margin(1)
Revenue Adj. EBITDA(1)
28.8%
28.1%
75.0%
73.0% 22.5%
70.8% 69.9%
62.3% 64.6% 63.3% 18.6%
62.2%
57.9%
53.5% 13.8% 12.9% 13.4%
COVID-related
slowdown & recovery
$10.9 $3.1
$10.2 8.9%
$2.9
$9.1 $9.3 $9.3 4.9%
$9.0
$8.3 $2.1
$7.2 $7.1 $1.7
(7.0%)
$5.7 $1.1 $1.2
$0.8 $0.9
$0.4
($0.4)
Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21
Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21
(1) Adjusted gross margin, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures, please see slide 25.
22 © Red Violet, Inc. All Rights Reserved.Appendix © Red Violet, Inc. All Rights Reserved.
Use and Reconciliation of Non-GAAP Financial Measures
Management evaluates the financial performance of our business on a variety of key indicators, including non-GAAP metrics of adjusted EBITDA, adjusted EBITDA margin, adjusted gross profit and adjusted gross margin. Adjusted EBITDA is a financial
measure equal to net loss, the most directly comparable financial measure based on US GAAP, excluding interest income, net, depreciation and amortization, share-based compensation expense, litigation costs, net, sales and use tax expense,
insurance proceeds in relation to settled litigation, transition service income, and write-off of long-lived assets and others. We define adjusted EBITDA margin as adjusted EBITDA as a percentage revenue. We define adjusted gross profit as revenue less
cost of revenue (exclusive of depreciation and amortization) and adjusted gross margin as adjusted gross profit as a percentage of revenue.
(Unaudited)
(In thousands) 2017 2018 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21
Net income (loss) $ (21,500) $ (6,868) $ (1,378) $ (3,850) $ (992) $ (4,856) $ (1,481) $ (2,532) $ (925) $ (1,875) $ (578) $ 1,761
Interest income, net - (84) (40) (37) (46) (13) (31) - 7 6 5 4
Depreciation and amortization 1,138 1,996 618 681 750 840 910 992 1,118 1,196 1,258 1,330
Share-based compensation expense 2,871 709 274 3,609 1,407 4,623 2,221 2,342 1,853 1,648 2,048 2,165
Gain on extinguishment of debt - - - - - - - - - - - (2,175)
Litigation costs, net 9,191 382 94 (47) 7 - - - - - 120 6
Sales and use tax expense - - - - - 205 - - - - - -
Insurance proceeds in relation to settled litigation - (350) - - - - - - - - - -
Transition service income - (218) - - - - - - - - - -
Write-off of long-lived assets and others - 92 30 - 11 3 111 106 35 222 19 41
Adjusted EBITDA $ (8,300) $ (4,341) $ (402) $ 356 $ 1,137 $ 802 $ 1,730 $ 908 $ 2,088 $ 1,197 $ 2,872 $ 3,132
Revenue $ 8,578 $ 16,302 $ 5,734 $ 7,245 $ 8,257 $ 9,050 $ 9,300 $ 7,056 $ 9,267 $ 8,963 $ 10,217 $ 10,879
Net income (loss) margin (250.6%) (42.1%) (24.0%) (53.1%) (12.0%) (53.7%) (15.9%) (35.9%) (10.0%) (20.9%) (5.7%) 16.2%
Adjusted EBITDA margin (96.8%) (26.6%) (7.0%) 4.9% 13.8% 8.9% 18.6% 12.9% 22.5% 13.4% 28.1% 28.8%
(Unaudited)
(In thousands) 2017 2018 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21
Revenue $ 8,578 $ 16,302 $ 5,734 $ 7,245 $ 8,257 $ 9,050 $ 9,300 $ 7,056 $ 9,267 $ 8,963 $ 10,217 $ 10,879
Cost of revenue (exclusive of depreciation and amortization) 7,066 8,638 2,669 3,052 3,122 3,414 3,292 2,587 2,703 2,694 2,761 2,720
Depreciation and amortization of intangible assets 866 1,730 554 617 689 777 850 934 1,063 1,143 1,258 1,330
Gross profit 646 5,934 2,511 3,576 4,446 4,859 5,158 3,535 5,501 5,126 6,198 6,829
Depreciation and amortization of intangible assets 866 1,730 554 617 689 777 850 934 1,063 1,143 1,258 1,330
Adjusted gross profit $ 1,512 $ 7,664 $ 3,065 $ 4,193 $ 5,135 $ 5,636 $ 6,008 $ 4,469 $ 6,564 $ 6,269 $ 7,456 $ 8,159
Gross margin 8% 36% 44% 49.4% 53.8% 53.7% 55.5% 50.1% 59.4% 57.2% 60.7% 62.8%
Adjusted gross margin 18% 47% 53% 57.9% 62.2% 62.3% 64.6% 63.3% 70.8% 69.9% 73.0% 75.0%
In order to assist readers of our consolidated financial statements in understanding the operating results that management uses to evaluate the business and for financial planning purposes, we present non-GAAP measures of adjusted EBITDA, adjusted
EBITDA margin, adjusted gross profit and adjusted gross margin as supplemental measures of our operating performance. We believe they provide useful information to our investors as they eliminate the impact of certain items that we do not consider
indicative of our cash operations and ongoing operating performance. In addition, we use them as an integral part of our internal reporting to measure the performance and operating strength of our business.
We believe adjusted EBITDA, adjusted EBITDA margin, adjusted gross profit and adjusted gross margin are relevant and provide useful information frequently used by securities analysts, investors and other interested parties in their evaluation of the
operating performance of companies similar to ours and are indicators of the operational strength of our business. We believe adjusted EBITDA eliminates the uneven effect of considerable amounts of non-cash depreciation and amortization, share-
based compensation expense and the impact of other non-recurring items, providing useful comparisons versus prior periods or forecasts. Adjusted EBITDA margin is calculated as adjusted EBITDA as a percentage of revenue. Our adjusted gross profit
is a measure used by management in evaluating the business’s current operating performance by excluding the impact of prior historical costs of assets that are expensed systematically and allocated over the estimated useful lives of the assets, which
may not be indicative of the current operating activity. Our adjusted gross profit is calculated by using revenue, less cost of revenue (exclusive of depreciation and amortization). We believe adjusted gross profit provides useful information to our investors
by eliminating the impact of non-cash depreciation and amortization, and specifically the amortization of software developed for internal use, providing a baseline of our core operating results that allow for analyzing trends in our underlying business
consistently over multiple periods. Adjusted gross margin is calculated as adjusted gross profit as a percentage of revenue.
Adjusted EBITDA, adjusted EBITDA margin, adjusted gross profit and adjusted gross margin are not intended to be performance measures that should be regarded as an alternative to, or more meaningful than, financial measures presented in
accordance with GAAP. The way we measure adjusted EBITDA, adjusted gross profit and adjusted gross margin may not be comparable to similarly titled measures presented by other companies, and may not be identical to corresponding measures
used in our various agreements.
24 © Red Violet, Inc. All Rights Reserved.Supplemental Metrics and Definitions
The following metrics are intended as a supplement to the financial information found in this presentation and other information furnished or filed with the SEC. These supplemental metrics are not necessarily derived from any underlying financial statement amounts. We believe
these supplemental metrics help investors understand trends within our business and evaluate the performance of such trends quickly and effectively. In the event of discrepancies between amounts in these tables and the Company's historical disclosures or financial statements,
readers should rely on the Company's filings with the SEC and financial statements in the Company's most recent earnings release.
We intend to periodically review and refine the definition, methodology and appropriateness of each of these supplemental metrics. As a result, metrics are subject to removal and/or changes, and such changes could be material.
(Unaudited)
(Dollars in thousands) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21
Customer metrics
idiCORE - billable customers (1) 4,020 4,370 4,781 5,064 5,326 5,375 5,758 5,726 5,902 6,141
FOREWARN - users(2) 15,444 19,721 23,853 30,577 36,506 40,857 44,927 48,377 58,831 67,578
Revenue metrics
Contractual revenue % (3) 67% 62% 66% 66% 69% 79% 68% 77% 80% 81%
Revenue attrition % (4) 5% 5% 6% 6% 8% 11% 10% 11% 7% 6%
Revenue from new customers (5) $ 1,285 $ 1,596 $ 1,406 $ 1,018 $ 1,417 $ 916 $ 726 $ 877 $ 967 $ 929
Base revenue from existing customers (6) $ 3,593 $ 4,480 $ 5,578 $ 6,690 $ 6,629 $ 5,047 $ 5,797 $ 6,678 $ 7,351 $ 8,354
Growth revenue from existing customers (7) $ 856 $ 1,169 $ 1,273 $ 1,342 $ 1,254 $ 1,093 $ 2,744 $ 1,408 $ 1,899 $ 1,596
Platform financial metrics
Platform revenue (8) $ 4,894 $ 6,152 $ 7,086 $ 7,651 $ 8,109 $ 6,856 $ 8,968 $ 8,603 $ 9,813 $ 10,588
Cost of revenue (exclusive of depreciation and amortization) $ 2,069 $ 2,287 $ 2,286 $ 2,431 $ 2,498 $ 2,428 $ 2,489 $ 2,448 $ 2,488 $ 2,529
Adjusted gross margin 58% 63% 68% 68% 69% 65% 72% 72% 75% 76%
Services financial metrics
Services revenue (9) $ 840 $ 1,093 $ 1,171 $ 1,399 $ 1,191 $ 200 $ 299 $ 360 $ 404 $ 291
Cost of revenue (exclusive of depreciation and amortization) $ 600 $ 765 $ 836 $ 983 $ 794 $ 159 $ 214 $ 246 $ 273 $ 191
Adjusted gross margin 29% 30% 29% 30% 33% 21% 28% 32% 32% 34%
Other metrics
Employees - sales and marketing 47 48 48 51 51 53 52 53 56 57
Employees - support 6 7 8 7 8 8 9 9 9 9
Employees - infrastructure 12 12 13 11 13 12 12 14 15 16
Employees - engineering 20 20 25 23 26 27 27 32 31 33
Employees - administration 14 14 13 16 15 14 15 18 16 19
(1) We define a billable customer of idiCORE as a single entity that generated revenue in the last three months of the period. Billable customers are typically corporate organizations. In most cases, corporate organizations will have multiple users and/or departments purchasing
our solutions, however, we count the entire organization as a discrete customer.
(2) We define a user of FOREWARN as a unique person that has a subscription to use the FOREWARN service as of the last day of the period. A unique person can only have one user account.
(3) Contractual revenue % represents revenue generated from customers pursuant to pricing contracts containing a monthly fee and any additional overage divided by total revenue. Pricing contracts are generally annual contracts or longer, with auto renewal.
(4) Revenue attrition is defined as the revenue lost as a result of customer attrition, net of reinstated customer revenue. It excludes expansion revenue and revenue from FOREWARN. Revenue is measured once a customer has generated revenue for six consecutive months.
Revenue is considered lost when all revenue from a customer ceases for three consecutive months; revenue generated by a customer after the three-month loss period is defined as reinstated revenue. Revenue attrition percentage is calculated on a trailing twelve-month
basis, the numerator of which is the revenue lost during the period due to attrition, net of reinstated revenue, and the denominator of which is total revenue based on an average of total revenue at the beginning of each month during the period.
(5) Revenue from new customers represents the total monthly revenue generated from new customers in a given period. A customer is defined as a new customer during the first six months of revenue generation.
(6) Base revenue from existing customers represents the total monthly revenue generated from existing customers in a given period that does not exceed the customers' trailing six-month average revenue. A customer is defined as an existing customer six months after their
initial month of revenue.
(7) Growth revenue from existing customers represents the total monthly revenue generated from existing customers in a given period in excess of the customers' trailing six-month average revenue.
(8) Platform revenue consists of both contractual and transactional revenue generated from our data fusion technology platform, CORE. It includes all revenue generated through our idiCORE and FOREWARN solutions. The cost of revenue, which consists primarily of data
acquisition costs, remains relatively fixed irrespective of revenue generation.
(9) Services revenue consists of transactional revenue generated from our idiVERIFIED service. The cost of revenue, which consists primarily of third-party servicer costs, is variable.
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